A shareholder is anyone or a company that holds a part ownership in a company through the purchase of shares on the stock exchange. Shareholders earn rewards when the company succeeds in increasing its stock valuation and financial earnings through dividends. Shareholders do not have to take on the responsibility of the liabilities or debts of the company, but they are taking an investment risk when they invest.
The types of shareholders in the business can be divided into two broad categories namely those who hold common shares as well as those who own preferred shares. It is also possible companylisting.info/2021/04/21/creating-an-llc-what-are-the-disadvantages/ for businesses to further divide these shares by class, with different rights tied to different classes of shares.
Employees are often awarded common shares as part of their compensation. They have voting rights over business matters and receive dividends from the profits of the business. They rank after preference shareholders in relation to the rights to assets in the event of the event of a liquidation of a business.
Preferred shareholders, on the other hand, are not entitled to participate in management decisions of the company. They also do not get a fixed dividend rate, and the rate may change depending on the profit situation of the company during any particular year. They are also paid prior to the common share is distributed in the event of the event of a company’s liquidation. Shareholders may also have other rights such as the right to receive a preferred or special dividend, or no dividend.